Figure 4-25
The graph below pertains to the supply of paper to colleges and universities.
RefertoFigure4-25.All else equal, sellers expecting the price of paper to decrease next
month when many college students leave campuses for the summer would cause a
current move from
a. x to y.
b. y to x.
c. SAto SB.
d. SBto SA.
The interest-rate effect
a. depends on the idea that increases in interest rates increase the quantity of money
demanded.
b. depends on the idea that increases in interest rates increase the quantity of money
supplied.
c. is the most important reason, in the case of the United States, for the downward slope
of the aggregate- demand curve.
d. is the least important reason, in the case of the United States, for the downward slope
of the aggregate- demand curve.
Other things the same, a decrease in the real interest rate raises the quantity of
a. domestic investment and net capital outflow.
b. domestic investment but not net capital outflow.
c. net capital outflow but not domestic investment.
d. neither domestic investment nor net capital outflow.
By not taking into account the possibility of consumer substitution, the CPI
a. understates the cost of living.
b. overstates the cost of living.
c. may overstate or understate the cost of living, depending on how quickly prices rise.
d. may overstate or understate the cost of living, regardless of how quickly prices rise.
When the relative price of a good decreases, consumers respond by buying
a. a larger quantity of that good and a larger quantity of substitutes for that good.
b. a larger quantity of that good and a smaller quantity of substitutes for that good.
c. a smaller quantity of that good and a larger quantity of substitutes for that good.
d. a smaller quantity of that good and a smaller quantity of substitutes for that good.
Figure 4-26
RefertoFigure4-26.Which of the following movements would illustrate the effect in the
market for doctor’s visits of an increase in the number of medical students graduating
from medical school and successfully completing their residency programs?
a. Point A to Point B
b. Point C to Point B
c. Point C to Point D
d. Point A to Point D
Other things equal, in countries with higher levels of real GDP per person, life
expectancy and literacy rates are higher than in countries with lower levels of real GDP
per person.
a. True
b. False
A decrease in the price of peanut butter will increase both the equilibrium price and
quantity in the market for jelly.
a. True
b. False
The value of the goods and services Australia purchases from the U.S. are less than the
value of goods and services the U.S. purchases from Australia. The U.S. has
a. positive net exports with Australia and a trade surplus with Australia.
b. positive net exports with Australia and a trade deficit with Australia.
c. negative net exports with Australia and a trade surplus with Australia.
d. negative net exports with Australia and a trade deficit with Australia.
If a line passes through the points (20,5) and (10,10), then the slope of the line is -2.
a. True
b. False
“Monetary policy can be described either in terms of the money supply or in terms of
the interest rate.” This statement amounts to the assertion that
a. rightward shifts of the money-supply curve cannot occur if the Federal Reserve
decides to target an interest rate.
b. the activities of the Federal Reserve’s bond traders are irrelevant if the Federal
Reserve decides to target an
interest rate.
c. changes in monetary policy aimed at expanding aggregate demand can be described
either as increasing the money supply or as increasing the interest rate.
d. our analysis of monetary policy is not fundamentally altered if the Federal Reserve
decides to target an interest rate.
President Ronald Reagan once joked that a Trivial Pursuit game designed for
economists would
a. have no questions but hundreds of answers.
b. have 100 questions and 3,000 answers.
c. have 1,000 questions but no answers.
d. never produce a winner.
Which of the following trade-offs does the production possibilities frontier illustrate?
a. If an economy wants to increase efficiency in production, then it must sacrifice
equality in consumption.
b. Once an economy has reached the efficient points on its production possibilities
frontier, the only way of getting more of one good is to get less of the other.
c. For an economy to consume more of one good, it must stop consuming the other
good entirely.
d. For an economy to produce and consume goods, it must sacrifice environmental
quality.
In the circular-flow diagram,
a. factors of production flow from government to firms.
b. goods and services flow from households to firms.
c. income paid to the factors of production flows from firms to households.
d. spending on goods and services flows from firms to households.
Evidence concerning hyperinflation indicates a clear link between the money supply
and the price level for
a. Austria in the 1920’s.
b. Hungary in the 1920’s.
c. Poland in the 1920’s.
d. All of the above are correct.
Figure 2-17
RefertoFigure2-17. The movement from point A to point B is a(n)
a. shift of the demand curve.
b. indication of a change in preferences for grapes.
c. movement along the demand curve.
d. indication of an increase in income.
In the past there have been violent protests against the World Bank and the World Trade
Organization. The protesters argued that these institutions promote free trade and also
encourage corporations in rich countries to invest in poor countries. The protesters
contended that these practices make rich countries richer and poor countries poorer. An
economist would
a. disagree with the protesters because these practices will help make both rich and poor
countries richer.
b. disagree with the protesters about free trade, but would agree with the protesters
about corporate investment.
c. disagree with the protesters about corporate investment, but would agree with the
protesters about free trade.
d. agree with the protesters.
Which of the following areas of study typifies microeconomics as opposed to
macroeconomics?
a. the impact of minimum-wage laws on employment in the fast food industry
b. the effect of changes in household saving rates on the growth rate of national income
c. the impact of faster money growth on the rate of inflation
d. a comparison of alternative tax policies and their respective impacts on the rate of the
nation’s economic growth
Table26-3.The following table presents information about a closed economy whose
market for loanable funds is in equilibrium.
RefertoTable26-3.Determine the quantity of loanable funds demanded.
a. $1.8 trillion
b. $1.6 trillion
c. $1.4 trillion
d. $0.8 trillion
When a minimum-wage law forces the wage to remain above the level that balances
supply and demand, there are more workers willing to work than there are jobs, so some
workers are unemployed.
a. True
b. False
In the open-economy macroeconomic model, the key determinant of net capital outflow
is
a. the real exchange rate. When the real exchange rate rises, net capital outflow rises.
b. the real exchange rate. When the real exchange rate rises, net capital outflow falls.
c. the real interest rate. When the real interest rate rises, net capital outflow rises.
d. the real interest rate. When the real interest rate rises, net capital outflow falls.
Which of the following is correct? Investment tax credits
a. can increase investment, but stimulating investment is not a key to ending a
recession.
b. can increase investment, which is a key to ending a recession.
c. can not increase spending on investment goods, but stimulating investment is not a
key to ending a recession.
d. can not increase spending on investment goods, but stimulating investment is a key
to ending a recession.
If aggregate demand shifts right, then eventually price level expectations rise. The
increase in price level expectations causes the short-run aggregate-supply curve to shift
to the left.
a. True
b. False
Points inside the production possibilities frontier represent inefficient levels of
production.
a. True
b. False
Scenario34-2.The following facts apply to a small, imaginary economy.
Consumption spending is $6,720 when income is $8,000.
Consumption spending is $7,040 when income is $8,500.
RefertoScenario34-2.The multiplier for this economy is
a. 1.31.
b. 6.25.
c. 2.78.
d. 2.27.
One of President Obama’s first policy initiatives was a stimulus bill that included large
increases in government spending.
a. True
b. False
Recessions are associated with lower incomes, rising unemployment, and falling
profits.
a. True
b. False
The normal rate of unemployment around which the unemployment rate fluctuates is
called cyclical unemployment.
a. True
b. False
According to 2012 data on the U.S. population, which of the following groups of adults
of prime working age (ages 25-54) had the highest unemployment rate?
a. white males
b. white females
c. black males
d. black females
When a government program is justified not on its merits but on the number of jobs it
will create,
a. the program is an efficient use of taxpayer dollars.
b. it should be approved only if the unemployment rate is low.
c. taxes should be raised to fund the program.
d. it is known as the “broken window fallacy.”